Statement of Cash FlowsIndirect Method

Glendive Corp. is in the process of preparing its statement of cash flows for the year ended June 30, 2017. An income statement for the year and comparative balance sheets are as follows:

	For the Year Ended June 30, 2017

Sales revenue	$550,000
Cost of goods sold	350,000
Gross profit	$200,000
General and administrative expenses	$55,000
Depreciation expense	75,000
Loss on sale of plant assets	5,000
Total expenses and losses	$135,000
Income before interest and taxes	$65,000
Interest expense	15,000
Income before taxes	$50,000
Income tax expense	17,000
Net income	$33,000

	June 30
	2017		2016
Cash	$31,000		$40,000
Accounts receivable	90,000		75,000
Inventory	80,000		95,000
Prepaid rent	12,000		16,000
Total current assets	$213,000		$226,000
Land	$250,000		$170,000
Plant and equipment	750,000		600,000
Accumulated depreciation	(310,000)		(250,000)
Total long-term assets	$690,000		$520,000
Total assets	$903,000		$746,000
Accounts payable	$155,000		$148,000
Other accrued liabilities	32,000		26,000
Income taxes payable	8,000		10,000
Total current liabilities	$195,000		$184,000
Long-term bank loan payable	$100,000		$130,000
Common stock	$350,000		$200,000
Retained earnings	258,000		232,000
Total stockholders' equity	$608,000		$432,000
Total liabilities and stockholders' equity	$903,000		$746,000

Dividends of $7,000 were declared and paid during the year. New plant assets were purchased during the year for $195,000 in cash. Also, land was purchased for cash. Plant assets were sold during the year for $25,000 in cash. The original cost of the assets sold was $45,000, and their book value was $30,000. Additional stock was issued for cash, and a portion of the bank loan was repaid.

Required:

1. Prepare a statement of cash flows for 2017 using the indirect method in the Operating Activities section. Use the minus sign to indicate cash payments, cash outflows, or decreases in cash.

Glendive Corp.
Statement of Cash Flows
For the Year Ended June 30, 2017
Cash Flows from Operating Activities
Net income	$
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation expense
Loss on sale of plant assets
Increase in accounts receivable
Decrease in inventory
Decrease in prepaid rent
Increase in accounts payable
Increase in other accrued liabilities
Decrease in income taxes payable
Net cash provided by operating activities	$
Cash Flows from Investing Activities
Sale of plant assets	$
Acquisition of land
Acquisition of new plant assets
Net cash used by investing activities	$
Cash Flows from Financing Activities
Repayment of long-term loan	$
Issuance of additional stock
Payment of cash dividends
Net cash provided by financing activities	$
Net decrease in cash	$
Cash balance, June 30, 2016
Cash balance, June 30, 2017	$

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The indirect method involves reporting net cash flow from operating activities; it is computed by adjusting net income to remove the effect of all deferrals of past operating cash receipts and payments and all accruals of future operating cash receipts and payments. The sum of operating, investing, and financing activities must equal the net change in cash.

2. Cash flow from operations computed under the direct method is preferred by investors as it provides more information by showing actual inflows and outflows of cash.

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Correct

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Partially correct